The Senate Banking Committee is now taking up the Dodd bill to re-make the financial services sector more into the image of how the government thinks it should be run, e.g., more beholden to Congressmen.\u00a0 Senator Menendez (D-NJ) offered an amendment to include disclosure of pay disparity, i.e., the ratio of CEO pay to the pay of the average (non-CEO) employee in the company.\u00a0 It’s clear that this amendment is meant to inflame passions about CEO pay, and nothing more.\u00a0 It won’t change what CEOs are paid because the premise behind this amendment, like so much else about pay regulation–that CEOs are paid arbitrarily high amounts–is wrong.\u00a0 CEOs are, on average, paid what the market says they’re worth, a law of supply and demand that Congress cannot rewrite or amend, only distort.<\/p>\n
One of the many possible distortions that come to mind would be an increasing trend to outsource low-skilled (and, therefore, low-paid) help, either to temp or admin agencies, or overseas.\u00a0 That would help reduce that ratio.\u00a0 It would also help to bring in-house the employment lawyer who will have to make the silly legal distinctions between who is an “employee” for the purposes of this bill. \u00a0 Would a part-time worker be included?\u00a0 Interns?\u00a0 A lawyer skilled at such useless arcana would presumably bump up the average.<\/p>\n
Hey, Senator, if you’re looking for useless ratios, why not mandate disclosure of the highest price product sold by a company versus its average priced product?\u00a0 Or something slightly more productive like the ratio of the highest tax versus the average tax jurisdiction they operate in?<\/p>\n